No, New Jersey does not have a local income tax. None of the state’s 564 municipalities taxes the wages of individual residents, and there is no local withholding box on your W-2 or separate city return to file. Your income tax obligation as a New Jersey resident runs to the state through Form NJ-1040 and stops there. The wrinkle worth knowing: if you commute across state lines to work in Philadelphia, New York, or Yonkers, those cities can tax the wages you earn inside their limits, and that obligation has nothing to do with where you live in New Jersey.
Why No New Jersey City Taxes Your Paycheck
State law does not let municipalities reach into an employee’s wages. Under N.J.S.A. 40:48C-14 and related sections, a city that taxes earnings at all is limited to an employer payroll tax — a levy the business pays on its own total payroll. N.J.S.A. 40:48C-16 goes further and prohibits any employer from withholding that tax from an employee’s pay.1Justia. New Jersey Revised Statutes Section 40-48C-16 – Ordinance; Contents
The practical result is that local revenue in New Jersey flows through property taxes and state aid rather than wage taxes on workers. There’s no municipal income tax department to deal with, no local return to file, and no additional line item on your paycheck for a New Jersey city. That’s a simpler picture than Pennsylvania, where hundreds of municipalities impose earned income taxes directly on workers.
The Newark and Jersey City Payroll Taxes Are on Employers
Two cities do tax payroll: Newark and Jersey City. Both impose a 1% tax, and in both cases the employer pays it. As a regular W-2 employee, you will not see a deduction for either.
Newark’s tax equals 1% of an employer’s total payroll — everything subject to federal income tax withholding — and the employer is responsible for the payment.2City of Newark. Payroll Tax Booklet 2025
Jersey City’s ordinance works the same way but exempts wages paid to Jersey City residents. The revenue supports the city’s public schools.3City of Jersey City. Payroll Tax
If You’re Self-Employed in Newark
Self-employed people and independent contractors working in Newark can face the payroll tax directly because they are their own employer. Newark’s filing instructions require these filers to attach a Schedule C or business tax return with the quarterly payroll tax form.2City of Newark. Payroll Tax Booklet 2025 If you earn self-employment income in Newark, check whether your work triggers a filing.
When You Commute to Philadelphia
Philadelphia taxes the wages of everyone who works inside city limits, residents and nonresidents alike. New Jersey residents working in Philadelphia owe the non-resident wage tax at 3.43%, and Philadelphia employers withhold it directly from each paycheck.4City of Philadelphia. Wage Tax (Employers)
One point trips up a lot of commuters. The New Jersey–Pennsylvania reciprocal income tax agreement stops Pennsylvania from taxing your wages at the state level, but it does not cover Philadelphia’s wage tax or any other Pennsylvania municipal tax. You still owe the Philadelphia tax even though your Pennsylvania state return shows no wage income.5NJ Division of Taxation. Credit for Taxes Paid to Other Jurisdictions
When You Commute to New York
New Jersey residents working in New York owe New York State income tax on the wages they earn there. They do not owe New York City personal income tax. Only NYC residents pay the city tax; nonresidents are exempt even when their office sits in Manhattan.6NY Department of Taxation and Finance. Frequently Asked Questions About Filing Requirements, Residency, and Telecommuting
Yonkers is a separate matter. If you earn income sourced to Yonkers, you may be subject to the Yonkers nonresident earnings tax.6NY Department of Taxation and Finance. Frequently Asked Questions About Filing Requirements, Residency, and Telecommuting
Remote Work Can Still Trigger Out-of-State Tax
Working from your New Jersey home does not automatically shield your wages from another state’s tax. New York applies the convenience of the employer test: if your remote arrangement exists for your own convenience rather than because your employer requires you to work out of state, New York treats those wages as New York-sourced and taxes them.7NY Department of Taxation and Finance. New York Tax Treatment of Nonresidents and Part-Year Residents
New Jersey enacted its own convenience of the employer rule under P.L. 2023, c.125 and offers credits to residents facing competing tax claims from states that apply convenience rules.8NJ Division of Taxation. Convenience of the Employer Sourcing Rule If you work remotely for a New York employer, review both states’ rules before you file.
Getting Credit for Local Taxes You Paid Elsewhere
New Jersey lets you offset taxes paid to other jurisdictions, including local wage taxes like Philadelphia’s, through Schedule NJ-COJ filed with your NJ-1040. If you paid tax to more than one outside jurisdiction, you may need a separate Schedule NJ-COJ for each.5NJ Division of Taxation. Credit for Taxes Paid to Other Jurisdictions
The credit only covers taxes based on income. For a sole proprietor or partner subject to Philadelphia’s Business Income and Receipts Tax, only the net income portion qualifies; the gross receipts portion does not.9NJ Division of Taxation. Credit for Income Tax Paid to Other Jurisdictions (Business/Nonwage Income)
Keep copies of any returns you filed with other jurisdictions to back up the credit. If you did not have to file a return with that jurisdiction, a W-2 showing the wage tax paid and the name of the taxing jurisdiction is acceptable documentation.10NJ Division of Taxation. 2025 Form NJ-1040 Instructions